Baron Financials ETF on AerCap Holdings N.V.
Thesis
Baron initiated a position in AerCap, the world's largest aircraft leasing company, because it sees a combination of secular air travel growth, constrained aircraft supply, strong industry positioning, and an inexpensive valuation. Aircraft shortages caused by OEM production constraints, engine shortages, and decade-long Boeing and Airbus backlogs are supporting utilization, lease rates, and asset values. AerCap's scale and excess capital allow it to acquire aircraft portfolios opportunistically, including from distressed airlines. The shares trade at approximately 9 times earnings and 1.3 times book value, while the company has recently sold assets well above carrying value and aggressively repurchased its own stock. Baron expects this combination to drive double-digit compounding in earnings and book value per share and similar share-price appreciation over time.
“We expect AerCap to keep compounding earnings and book value per share at double-digit rates for the foreseeable future”